“AT&T’s elimination of T-Mobile as an independent, low- priced rival would remove a significant competitive force from the market." -- U.S. DOJ (Source: Miramax Films)

U.S. Justice Department says combined company would break antitrust laws

AT&T Inc.'s (T) bid to acquire to rival U.S. carrier Deutsche Telekom AG's (ETR:DTE) T-Mobile USA may have slammed into a roadblock today, with Bloomberg reporting that the U.S. Department of Justice had filed paperwork to block the acquisition.

The deal would mark the latest consolidation in the race by America's top carriers Verizon Communications, Inc. (VZ) and AT&T to gobble up would-be competitors. Had the deal been approved it would have granted AT&T and Verizon control over more than 80 percent of American cell phone contracts -- a "duopoly" according to some. AT&T would have approximately 130 million subscribers, while Verizon would have 97 million subscribers.

Verizon and AT&T often marched in lock step when it came to pricing and contract terms, as witnessed by both companies' decisions to kill "unlimited" smart phone internet privileges for new customers [1][2].

AT&T Chairman and CEO Randall Stephenson championed the deal, stating that it would fulfill President's Obama's vision to blanket the nation with high-speed wireless access:

This transaction delivers significant customer, shareowner and public benefits that are available at this level only from the combination of these two companies with complementary network technologies, spectrum positions and operations. We are confident in our ability to execute a seamless integration, and with additional spectrum and network capabilities, we can better meet our customers’ current demands, build for the future and help achieve the President’s goals for a high-speed, wirelessly connected America.

However, almost the majority AT&T and T-Mobile customers we interviewed expressed concern about the deal -- particularly T-Mobile customers who feared increases from T-Mobile's budget prices.

The deal would have left Sprint Nextel Corp. (S), who bitterly opposed the deal, in a distant third place, with 52 million customers. Sprint thus far has refused to join the informal Verizon-AT&T coalition when it comes to contract terms -- it continues to offer unlimited internet.

Reportedly the U.S. Justice Department sided with Sprint in the end, filing paperwork to block the merger, citing antitrust concerns.

"AT&T’s
elimination of T-Mobile as an independent, low- priced rival would remove a
significant competitive force from the market," said the filing [press release].

"The combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for mobile wireless services," said Deputy Attorney General James M. Cole. "Consumers across the country, including those in rural areas and those with lower incomes, benefit from competition among the nation's wireless carriers, particularly the four remaining national carriers. This lawsuit seeks to ensure that everyone can continue to receive the benefits of that competition."

If the
U.S. Government makes good on its intentions and officially blocks the sale of
T-Mobile, AT&T has promised to pay Deutsche Telekom $3 billion USD in cash.
In addition, Deutsche Telekom would receive an additional $2 billion USD worth
of spectrum and secure a $1 billion USD roaming agreement reports
Reuters.

We are surprised and disappointed by today’s action, particularly since we have met repeatedly with the Department of Justice and there was no indication from the DOJ that this action was being contemplated.

We plan to ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed. The DOJ has the burden of proving alleged anti-competitive affects and we intend to vigorously contest this matter in court.

At the end of the day, we believe facts will guide any final decision and the facts are clear. This merger will:

Help solve our nation’s spectrum exhaust situation and improve wireless service for millions.

Allow AT&T to expand 4G LTE mobile broadband to another 55 million Americans, or 97% of the population;

Result in billions of additional investment and tens of thousands of jobs, at a time when our nation needs them most.

We remain confident that this merger is in the best interest of consumers and our country, and the facts will prevail in court.

The DOJ today delivered a decisive victory for consumers, competition and our country. By filing suit to block AT&T’s proposed takeover of T-Mobile, the DOJ has put consumers’ interests first. Sprint applauds the DOJ for conducting a careful and thorough review and for reaching a just decision – one which will ensure that consumers continue to reap the benefits of a competitive U.S. wireless industry. Contrary to AT&T’s assertions, today’s action will preserve American jobs, strengthen the American economy, and encourage innovation....

Comments

Threshold

Username

Password

remember me

This article is over a month old, voting and posting comments is disabled